Insurance. An auto insurance company classifies its customers in three categories: poor, satisfactory, and preferred. Each year, 40 % of those in the poor category are moved to satisfactory, and 20 % of those in the satisfactory category are moved to preferred. Also, 20 % in the preferred category are moved to the satisfactory category, and 20 % in the satisfactory category are moved to the poor category. Customers are never moved from poor to preferred, or conversely, in a single year. Assuming that these percentages remain valid over a long period of time, how many customers are expected in each category in the long run?
Insurance. An auto insurance company classifies its customers in three categories: poor, satisfactory, and preferred. Each year, 40 % of those in the poor category are moved to satisfactory, and 20 % of those in the satisfactory category are moved to preferred. Also, 20 % in the preferred category are moved to the satisfactory category, and 20 % in the satisfactory category are moved to the poor category. Customers are never moved from poor to preferred, or conversely, in a single year. Assuming that these percentages remain valid over a long period of time, how many customers are expected in each category in the long run?
Solution Summary: The author explains that there are three categories in an auto insurance company, which are poor, satisfactory and preferred.
Insurance. An auto insurance company classifies its customers in three categories: poor, satisfactory, and preferred. Each year,
40
%
of those in the poor category are moved to satisfactory, and
20
%
of those in the satisfactory category are moved to preferred. Also,
20
%
in the preferred category are moved to the satisfactory category, and
20
%
in the satisfactory category are moved to the poor category. Customers are never moved from poor to preferred, or conversely, in a single year. Assuming that these percentages remain valid over a long period of time, how many customers are expected in each category in the long run?
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